Event cancellation insurance policies purchased before 2020 might cover the economic losses resulting from cancelling an event due to the coronavirus.
Event cancellation policies are often complex, sometimes confusing, and may contain traps for the unwary.
Even if an event cancellation policy contains exclusions for SARS or government-ordered quarantines, a coronavirus cancellation may still be covered.

On March 4, 2020, Los Angeles Dodgers President Stan Kasten acknowledged that, under certain circumstances, the Dodgers could “wind up either canceling games or holding games without spectators” because of the coronavirus. This announcement came on the heels of the National Basketball Association’s recommendations to its players that they should utilize fist-bumps over high-fives with fans and cautioning players not to take items to autograph from fans such as balls, jerseys and pens. Despite these precautions, two NBA players have tested positive for the virus and the league has suspended the remainder of the season, effective March 11, 2020, until further notice. Similar suggestions have already been implemented by the English Premier League, which has banned all handshakes before its soccer matches. The National College Players Association has also suggested to the NCAA that it should seriously consider holding March Madness games in empty arenas.

Last Friday’s announced cancellation of the annual South by Southwest film, tech, media and music conference held in Austin in March was just the beginning, as book festivals, holiday parades and even the popular Coachella music festival have added to the cascade of cancellations and postponements

Major League Baseball recently sent a memo to its 30 teams warning them to be diligent about coronavirus and to carefully check players with flu-like symptoms. That memo also encouraged everyone affiliated with teams to be vigilant about washing and sanitizing their hands, and those employees and players have also been encouraged to not shake hands or utilize high-fives. There are currently 18 players on major league rosters who were born in countries hit hard by the coronavirus like Japan (9 players), Taiwan (5 players), and South Korea (4 players). Tampa Bay Rays pitcher, Ji-Man Choi, whose mother and brother currently live in South Korea, has, out of an abundance of caution, asked all Korean media members to conduct their interviews with him outside the Spring Training clubhouse to help shield his teammates from any possible exposure.

Now that the NBA has suspended the remainder of the 2019-20 season, the NHL has followed suit, and the NCAA men’s and women’s basketball tournaments will be played in empty arenas because of the COVID-19 virus and related local and state emergency declarations, it may be a matter of time before Major League Baseball also announces postponements, suspensions of games, or games played in empty stadiums.   

Many entertainment companies, music promoters, and professional sports teams often secure specialized “Event Cancellation Insurance” coverage on either an annual basis or specifically for large events, including large music festivals. These types of policies are meant to insure event-related revenue or expenses against a cancellation due to circumstances beyond the policyholder’s control (usually delineated as “all-cause” coverage), such as weather events like hurricanes, tornadoes, major storms, earthquakes and wildfires, as well as terrorism events, labor strikes, non-appearance of key people, and unavailability of the venue due to fires, floods or power outages. Variations of this type of insurance coverage exist in the sports, entertainment and event planning industries (including convention planning).

An “all-cause” event cancellation policy could, depending on the policy wording, provide coverage for event cancellations due to an outbreak of infectious or communicable diseases such as the coronavirus. As with most insurance coverage issues, whether a particular loss is covered by a particular insurance policy depends almost entirely on the policy language along with the specific circumstances of the loss.  

For those policyholders who procured event cancellation insurance before January 2020, they may have purchased optional coverage, for an additional cost, for cancellations due to infectious or communicable diseases. It has been reported that such coverage is no longer being offered and, in fact, many insurance companies are including specific coronavirus exclusions in newly issued event cancellation policies. Seventeen years ago, during the height of the severe acute respiratory syndrome (SARS) outbreak, insurers began universally applying a SARS exclusion to all event cancellation policies. These types of policies may also contain a “pandemic” exclusion or an exclusion for government-issued quarantines but, depending on the wording of any of these exclusions, coverage might still exist for events cancelled because of the coronavirus.

The bottom line for policyholders who purchased event cancellation insurance policies before the coronavirus became headline news earlier this year is that the policies they purchased might well cover the economic damages flowing from the cancellation of an event due to COVID-19. Event cancellation insurance policies, like many other types of insurance coverage, are often complex, sometimes confusing, and could well contain traps for the unwary. As a result, entertainment companies, music promoters and professional sports teams facing losses because an event has been cancelled due to the coronavirus, or those worried about potential cancellations, should consult with an experienced sports or entertainment insurance recovery attorney to review the policy language and to help coordinate with insurance brokers and carriers and to assist with properly crafting of a claim submission in order to optimize coverage under the specific policy at issue.

Pillsbury’s experienced crisis management professionals are closely monitoring the global threat of COVID-19, drawing on the firm's capabilities in supply chain management, insurance law, cybersecurity, employment law, corporate law and other areas to provide critical guidance to clients in an urgent and quickly evolving situation. For more thought leadership on this rapidly developing topic, please visit our COVID-19 resources page.